Coskata: So Close, Yet So Far for the Cellulosic Ethanol Biz

Waiting for the cellulosic ethanol industry to move into commercial production is like watching grass grow. This morning cellulosic ethanol developer Coskata unveiled that it’s demonstration plant in Madison, Penn., is now up and running and ready to produce 50,000 gallons of the biofuel per year. It’s a big milestone for the company in terms of reaching this scale, but the demo plant, which the company is calling a “semi-commercial facility” in the press release, is a far cry from the commercial plant that’s supposed to produce 50 million to 100 million gallons per year and has been waylaid by the bad economy.

Coskata’s demo plant will be a proving ground for its cellulosic ethanol production process and will help the company see if it can reach that landmark $1 per gallon production price, which the company has been touting since it launched back in January 2008. Coskata is working with tech partner Westinghouse Plasma, which is providing the plasma gasification process for the plant, and is delivering the fuel to investor and partner General Motors for testing in flex-fuel vehicle tests at the automaker’s site in Milford, Mich.

The unveiling of the demo plant shows just how long it takes cellulosic ethanol makers to scale up and reach the economies of scale needed for a competitive commercial fuel. Coskata CEO Bill Roe tells the New York Times that “We’re so close, we can really touch this now.” But last time I heard Roe speak, he told the Wall Street Journal Eco:nomics conference in March that the company is waiting for a loan guarantee from the Department of Energy to build its first commercial scale plant and that the plant is basically stalled until then.

Coskata already has some significant corporate and venture capital backers. The company raised funds from Khosla Ventures, General Motors, Globespan Capital Partners, GreatPoint Ventures and Advanced Technology Ventures. Other companies that haven’t raised as much from prominent companies could be moving more slowly.

If you’ve been watching this industry, like we have, from the beginning, you get used to these milestones: start construction on a demo/pilot facility, finish construction on facility, ship small scale amounts to testers, etc. But none of the companies racing to produce cellulosic ethanol in the U.S. have hit the milestone yet of commercial production. The farthest along is Range Fuels, another contender backed by Vinod Khosla, which tells the New York Times that it’s about half way done with its commercial production facility, and that it has gotten some significant government support. But even Range is moving slower than expected and won’t be done for years.